The Effect of Deal Knowledge on Consumer Purchase Behavior

Abstract

Research has shown that there is heterogeneity in consumer knowledge of prices and deals. In addition, it has been found that buyers' purchase behavior can be influenced not only by the current price of a product, but also by what prices they expect in the future. The author builds a purchase quantity model to contrast normative behavior of consumers who have knowledge of future price deals with that of those who do not. Implications from the model are derived concerning consumer deal response for the consumer's preferred and less preferred brands. These implications show that normative purchase behavior is very different between consumers with and without knowledge of future deals. The model implies that consumers with knowledge of future deals could be more likely to purchase on low-value deals and deals on less preferred brands compared with consumers without knowledge of future deals. Another implication of interest is that the relative quantity purchased by consumers who have deal knowledge compared with those who do not depends on the time pattern of deals. The implications are supported in a laboratory experiment. The author finds that actual behavior varies depending on deal knowledge and is quite consistent with model predictions.